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Tuesday, December 27, 2011

IAG Acquires BMI; Virgin Slams the Deal

IAG, British Airways’ owner, beat competitor Virgin Atlantic in the bidding battle for Lufthansa's loss-making airline BMI. This will help the group to secure its future growth at Heathrow, one of world’s busiest airports.

British Airways’ owner International Airlines Group (IAG) has won the race to buy loss-making BMI. IAG has edged out Virgin Atlantic by acquiring BMI from Lufthansa with a 172.5 million-pound ($271 million) bid.

Buying Heathrow airport's second largest airline will add 56 slot pairs to IAG’s portfolio at UK’s primary airport. This will raise the BA’s share from about 44% to 53% at the airport, consolidating the carrier’s position at Heathrow.

BMI has operations to Middle East, Europe and Africa and has 8.5% of the Heathrow landing slots. BMI also owns BMI regional and BMIBaby, a low fare airline known to offer cheap flight tickets. IAG has made it clear that it is only interested in BMI’s mainline business. The group warned there will be “significant price reduction” in case Lufthansa is not able to sell off BMI Regional and BMIBaby before the deal finalises.

Virgin Atlantic Not Happy

Beaten in the race to buy BMI, Virgin Atlantic does not seem to be taking the defeat very sportingly! Virgin’s founder Sir Richard Branson claimed the deal to be bad for the industry and urged European competition authorities to block it.

News websites quoted Sir Richard as saying: “BA is already dominant at Heathrow and their removal of bmi just tightens their stranglehold at the world's busiest international airport. We will fight this monopoly every step of the way as we think it is bad for the consumer, bad for the industry and bad for Britain.”

A spokesman for Virgin added further: “If the acquisition is completed, it will tilt the competitive landscape dangerously towards BA and cast a shadow over the British travelling public. We will be asking the competition authorities to stop this deal and to protect the many millions of passengers on routes where BA and BMI currently compete.”

He also implied that the monopoly of BA on London Heathrow is going to be bad news for travellers who seek cheap flight tickets from the airport.

“With Heathrow sewn up, BA can use its monopoly power to force up prices at the expense of the consumer,” he was quoted news portals.

‘Target Asia’

British Airways is one of the world’s largest carriers with a strong presence in many parts of the world. Sources indicate that UK’s flag carrier will now be looking to exploit some of BMI’s slots by switching them to inter- continental routes once the airline gets the delivery of 12 Airbus SAS A380 super jumbos and 24 Boeing Co. 787 Dreamliners in 2013. IAG may start offering flights to Malaysia, Indonesia, Korea and Vietnam, and boost its services to China from Heathrow.

BA has never operated flights to Incheon airport - the biggest hub in South Korea, and the airline discontinued its flights to Malaysia (Kuala Lumpur) in 2001 to focus more on Bangkok and Singapore.

However, Sir Richard alleged the plan about new markets from Heathrow is just a “smoke-screen."